NASHVILLE — Federal stimulus money will allow Tennessee agencies to phase in 12 percent spending cuts over three years, Gov. Phil Bredesen said in a speech to lawmakers Monday.

The Democratic governor said even deeper cuts — including substantial layoffs — would have been needed starting in the budget year that begins in July if it weren’t for the federal money.

“This so-called ‘stimulus’ package is not a silver bullet — what it does is buy us time,” Bredesen said.

The state is expected to receive about $4.5 billion in federal stimulus money over two years, though only a portion can be used to plug budget holes. Bredesen said about $750 million in cuts will be necessary by 2011.

Under Bredesen’s budget proposal, Tennessee would spend $29.34 billion in the budget year that begins on July 1. That’s about $430 million less than the current budget year.

Bredesen said K-12 education is the one area that will be spared budget cuts in the upcoming spending years. All other state agencies will average a 12 percent reduction, he said.

Bredesen said the federal money will help avoid what could have been up to 1,700 state employee layoffs. The governor’s budget instead plans to eliminate 80 filled positions in what Bredesen calls “a business decision” about government operations. He also won’t rule out further layoffs in future years.

“The governor proposes a conservative, responsible budget — just like the budgets many Tennessee families are having to make,” Herron said. “I agree with his priorities of schools and school children, jobs and workers, and help for those who’ve lost their jobs. “And I’m especially pleased there is funding for the West Tennessee megasite that can create thousands of new good-paying jobs.”

House Democratic Caucus Chairman Mike Turner said he was pleased the governor’s budget avoids mass layoffs.

“I feel for anybody who gets laid off, and if we can fix that part we’ll do that, too,” said Turner, of Old Hickory. “But we were talking about more than 2,000 people, so we’ve come a long way from where we were.”

The governor’s budget presentation shows how he plans to spend the federal stimulus money on the remainder of the current spending year and the following two fiscal years.

Bredesen’s plan also predicts where state finances are expected to stand once the federal money runs out in the 2011-12 budget year. Bredesen’s second term ends in January 2011, and he is constitutionally barred from seeking another.

“It is important to me not to leave my successor — or the next General Assembly — a budgetary cliff to fall off,” Bredesen said.

Senate Majority Leader Mark Norris said he and his Republican colleagues will carefully go over the budget proposal. Norris, of Collierville, said he has concerns about increased debt obligations that would be incurred from the governor’s plan to sell more bonds for bridge and capital projects.

“We’ve got to look at that cliff he talks about,” Norris said.

Bredesen warned local governments and school districts not to forget that the new money they will receive is temporary.

“You have a windfall for the next two years,” he said. “If you create obligations with it that go beyond two years, do not look for the state to bail you out.”

About $470 million of stimulus money would be directed toward public colleges and universities under the governor’s plan, which he said should stop immediate deep cuts and hold tuition increases to a minimum.

Bredesen said the state’s public colleges and universities would receive $100 million by the end of this year, with the rest to be divided over the next two years. But officials need to begin planning for when that money runs out, he said.